Tuscaloosa City Council OKs increases in downtown hotel incentives

View full sizeThe CityFest lot in Tuscaloosa, Ala., following an archaeological survey ahead of the planned construction of a downtown Embassy Suites hotel at the site. (Chris Pow / al.com)

TUSCALOOSA, Alabama -- The Tuscaloosa City Council unanimously voted Tuesday night to approve increases in the city's economic development incentive package for a developer planning to build a downtown hotel.

The amendment to the incentives, in the form of tax rebates, would add $276,115 to restore the site of the former CityFest lot following a required archaeological survey as well as $609,500 to meet rising costs for materials reported by the developer, Memphis, Tenn.-based Kemmons Wilson Cos.

In September 2012, the city agreed to offer up to $4 million or 10 years in property and lodging tax rebates to the company, which plans to build an eight-story, full-service Embassy Suites hotel at the lot at University Boulevard and Greensboro Avenue. The total investment currently estimated by the company would be $31 million, City Attorney Tim Nunnally said Tuesday night.

Nunnally presented to the City Council the recommended changes to increase lodging tax rebates from 44 percent to 54.35 percent over a maximum period of ten years to pay for both the site work and additional material costs. The city's municipal lodging tax is 11 percent.

The property tax rebates will remain unchanged, Nunnally said.

"It's very important for the City Council and the public to understand that incentives are paid entirely from revenues generated by the hotel developer," Nunnally said.

"Even with these increases, the economic incentives and the payment for the site preparation work caused by the archaeological survey, are in the staff's opinion, the mayor's opinion, and I believe the City Council's opinion -- based on the resolutions you have adopted -- well within the range of what is an excellent use of public funds to assist this development," Nunnally said.

"Tim and our staff, including myself, talked with many local engineers and contractors, reviewed the data provided the city to see if the length of the archaeological study did have an effect on the increase on construction prices," Maddox said.

Nunnally said around $6 million is estimated to go back to the city after incentives are paid, including $1.855 million for the sale of the property that will go back in the city's Community Development Block Grant program.

Maddox and Nunnally said that all of the risk falls on the developer, as incentives are paid solely from taxes generated by the hotel.

Feasibility studies by the developer and developers previously interested in the property showed that a high-quality, full-service hotel would require economic development assistance, Nunnally said.

The downtown hotel will bring in 125 construction jobs and 57 full-time jobs once operational, and would fill a need for a premium hotel in the city, Nunnally said.

Nunnally said Tuesday night the city plans to close on the property this week. Kemmons Wilson was aiming at a late summer 2014 completion, but could open that fall.

Maddox said filling the need for more full-service hotels falls in line with plans to have a feasibility study done with the University of Alabama on the expansion of the Bryant Conference Center. A 2007 survey shows 48 percent of conferences were not considering Tuscaloosa due to the lack of convention space and first-class hotels, Maddox said.

City Councilman Lee Garrison called the hotel a "game changer" for Tuscaloosa.

"I just want to thank our staff and you, mayor, for negotiating what I think that we'll look back on years from now as one of the wisest investments we'll make in our downtown area," Garrison said.